Ken Smith, CLU, FLMI
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Ponte Vedra Beach, FL 32082
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E-mail: ksmith@kensmithinsurance.com
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Federal Tax Credit for Health Insurance Benefits Provided to Lower Wage Employees

From IRS.gov: Many small businesses and tax-exempt organizations that provide health insurance to their employees now qualify for a special tax credit, according to the Internal Revenue Service. The credit is designed to encourage small business employers to provide health insurance to their employees, or to maintain such coverage already in place. Generally, the credit is available to small employers paying at least half the cost of single coverage for their employees. (The business owner(s) and their families are not eligible for the credit.)

Beginning with the 2011 income tax year, maximum credit is 35% of premiums paid in 2011 by eligible employers, and 25% of such for tax exempt organizations. In 2014, the credits increase to 50% and 35%, respectively.

Small businesses and tax exempt organizations paying low to moderate wages are targeted by this new tax credit. It is generally available to employers having 25 "full time equivalent" (FTE) employees paying wages averaging less than $50,000 per employee per year. As the eligibility formula is based partly on FTE's, rather than number of employees, many businesses will qualify even if they employ more than 25 individual employees.

Maximum credit goes to smaller employers, those with 10 or fewer FTE's, paying average annual wages of $25,000, or less. Eligible small businesses may be able claim this credit on their income tax returns. Tax exempt employers must contact the IRS for further information about how to claim the credit.

If you believe your business or tax exempt organization might qualify for this special tax credit, contact your CPA/tax advisor, for assistance. For more comprehensive information, go to: IRS.gov (small business health care tax credit)

Ref: Patient Protection and Affordability Care Act of March 23, 2010

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